Understanding Schedule D for Secured Creditor Claims
Schedule D: Creditors Who Hold Claims Secured By Property (individuals)
In this video and blog, I’m walking through the bankruptcy petition in the exact order it appears on the court’s website regarding the forms. This blog will focus on the schedule of secured creditors, known as Schedule D, which typically mortgages and car loans.
Listen to this Podcast.
One key point: you must list all secured debts on Schedule D, even if you plan to keep the asset. People often say, “I’m keeping my car, so I won’t include it.” That’s a misconception. Listing it doesn’t mean you’re surrendering the asset; it’s just part of the disclosure. Whether you keep it depends on your state’s exemptions and the equity in that asset.
I am posting blogs explaining each state’s exemptions, along with the exemption statutes, since I’ve seen that much of the online information is outdated.
I’ll start with amending the petition. If you forgot a creditor, you’ll need to file an amended petition. You can learn about amending the bankruptcy petition via the blog post below.
As for listing the secured debt information, the required information is straightforward: list the creditor, their address, and the debt details. But like the prior videos, I’m focusing more on common issues and pitfalls to avoid.
Home Equity, Exemptions & Reaffirmation Agreements
Here’s the most important information regarding secured debt on Schedule D and that’s the fair market value of your home, the mortgage balance, equity, and the exemption amount.
For example, if your house is worth $100,000 and you owe $25,000 on the mortgage, that leaves you with $75,000 in equity. Is that a problem? It depends entirely on your state’s exemptions. That’s why it’s important to know the exemption amounts offered in your state. Take Florida as an example.
In Florida, there’s an unlimited homestead exemption, so the $75,000 is protected and a non-issue, but cross over into Georgia, and the exemption drops to $21,500. That leaves $53,500 non-exempt. This difference is why Chapter 7 filings are more common in Florida, while there are more Chapter 13 filings in Georgia. When your equity exceeds the exemption, you may need to consider Chapter 13 to protect your home.
Reaffirmation Agreements: The Double-Edged Sword
If you want to keep the asset secured by debt, such as your home or car, you’ll likely sign a reaffirmation agreement, which means you’re keeping the debt and excluding it from discharge. But here’s the catch:
Once you file Chapter 7, you can’t file again for eight years. However, suppose your financial situation changes, such as a job loss or a drop in income, and you fall behind on the payments. You’re now on the hook for the debt. This means the creditor can repossess the asset and sue for the balance left on the loan.
So while reaffirmation agreements preserve ownership, they also preserve liability. However, there might be a loophole depending on your state.
Reaffirmation Agreements “Ride Through” States: A Loophole?
Some states, like Florida, allow what is called a “ride-through” option. This means if you didn’t sign a reaffirmation agreement, but continue making payments, the creditor accepts the payment. Once the debt is paid off, you own the asset. But again, that’s not available in every jurisdiction.
Creditors Playing Games With Your Credit Report
Creditors often claim they can’t report your mortgage or car loan to the credit bureaus unless you sign a reaffirmation agreement, citing the Fair Debt Collection Practices Act (FDCPA). That’s fiction. There’s no such provision in the FDCPA. It’s a pressure tactic designed to force you to sign the Reaffirmation Agreement. If not, this creates more issues.
If a lender doesn’t report your timely payments, then your credit score isn’t improving. Imagine trying to refinance with a new lender and there’s no proof of payments of your mortgage on your credit history.
That’s the downside of skipping the reaffirmation agreement. Personally, I’ve yet to see a mortgage or auto lender reverse course and update the credit report without a reaffirmation agreement.
Mortgages, Cars & Divorce: Timing Is Everything
If you are considering filing for divorce or are in the process, this could affect your bankruptcy case. Why? Because if you sell the home and split the proceeds, you need to invest those funds into a new home to preserve the exemption. If the money sits in a bank account, it’s no longer protected.
So sometimes, you might have to file for bankruptcy together first, clear the debts, then proceed with the divorce and sell the home. Even if you’re not on speaking terms, now is a good time to get along briefly to save potentially thousands of dollars.
Why? Because in many states, you have a limited window (often up to two years) to reinvest proceeds from a home sale into a new property to preserve the exemption. But that’s risky. Trustees will track whether you reinvested within the allowed timeframe; if not, you will get sued for those funds, and it’s likely the trustee will seek to reverse your bankruptcy discharge.
Chapter 7, Non-Exempt Equity & the Bankruptcy Trustee
If you’re applying exemptions and your equity exceeds the protected amount, say $75,000 in a state with a $21,500 exemption, such as in Georgia, you need to tread carefully.
Once you file Chapter 7, any non-exempt assets become fair game. And trustees? They’re not going anywhere. They’ll object to a dismissal, and if you skip court, they won’t just let it slide. Why? Because you’re taking money from their pocket.
Trustees earn a percentage, depending on the amount, of the non-exempt assets that are part of the bankruptcy estate. So if your petition is wrong and the assets are not properly protected, the trustee will fight tooth and nail to keep it in play.
Compare Schedule D to Schedules A/B & Schedule C
Make sure to review and compare Schedule D to Schedules A/B and Schedule C. Schedule C is where you apply your exemptions, while Schedule A/B summarizes your assets and liabilities, and it’s a great way to catch errors.
- Schedule C: The Property You Claim as Exempt (individuals)
- Form Number: B 106A/BSchedule A/B: Property (individuals)
You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.
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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.
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